How India became the 5th largest economy in the world

India became the world's fifth-largest economy in 2023, according to the International Monetary Fund (IMF). The country's nominal GDP has risen quickly in the past 25 years, leapfrogging France and the UK by some economic measures. India's GDP growth has been among the highest in the world in the past decade, regularly achieving annual growth of 6-7%. This rapid rise has been fueled by several factors, including urbanization and technologies that have improved efficiency and productivity. Despite its growth, challenges, from sustainability to infrastructure, still need to be addressed. India became the 5th largest economy in the world in 2023, overtaking the United Kingdom. This is a remarkable achievement, given that India was ranked 11th in 2012.

India

· GDP: $3,740 billion

· GDP By Country Per Capita (Nominal): $2,601

· Annual GDP Growth Rate: 5.9%

India is ranked 5th in the world's GDP rankings in 2023. India's economy boasts diversity and swift growth, fuelled by key sectors such as information technology, services, agriculture, and manufacturing. The nation capitalizes on its broad domestic market, a youthful and technologically adept labour force, and an expanding middle class.

Several factors have contributed to India's economic growth in recent years, including:

· Demographic dividend: India's growing young population is a significant economic asset. The working-age population is expected to grow by over 100 million in the next decade.

· Economic reforms: The Indian Government has implemented several economic reforms in recent years, such as liberalization and privatization. These reforms have created a more favourable environment for businesses to operate in.

· Growing middle class: India's middle class is growing rapidly. This is creating a large domestic market for goods and services.

· Increased foreign investment: India is attracting increasing amounts of foreign investment. This is helping to boost the economy and create jobs.

India's economy is expected to continue to grow in the coming years. The International Monetary Fund (IMF) forecasts that India will grow at 7% in 2023, making it the fastest-growing major economy in the world.

Here are some of the critical sectors that are driving India's economic growth:

· Services: The services sector is the largest in the Indian economy, accounting for over 50% of GDP. The sector is growing rapidly, driven by solid growth in the IT, financial services, and tourism industries.

· Manufacturing: The manufacturing sector is also growing rapidly, accounting for over 15% of GDP. The sector benefits from government policies such as the Make in India initiative.

· Agriculture: The agriculture sector accounts for about 17% of GDP. The sector is growing slowly, but it is still a significant employer and a source of food security for India.

India's economic growth has its challenges. The country faces several issues, such as poverty, inequality, and infrastructure shortages. However, the Indian Government is committed to addressing these challenges and achieving sustainable economic growth.  

Income brackets of India    

Income tax in India is levied on the income earned by individuals, HUFs, partnership firms, LLPs, and Corporations as per the Income Tax Act of India. 

The income tax slabs for individuals are divided into three categories:

• Individuals below the age of 60
• Individuals between 60 and 80
• Individuals above the age of 80

Here are the income tax slabs for individuals below the age of 60 for FY 2023-24 (AY 2024-25):

Income Range, Income Tax Rates

 Up to ₹3,00,000:  Nil

 ₹3,00,000 to ₹6,00,000: 5% on income which exceeds ₹3,00,000

 ₹6,00,000 to ₹9,00,000: ₹15,000 + 10% on income more than ₹6,00,000

 ₹9,00,000 to ₹12,00,000: ₹45,000 + 15% on income more than ₹9,00,000

 ₹12,00,000 to ₹15,00,000: ₹90,000 + 20% on income more than ₹12,00,000

 Above ₹15,00,000: ₹150,000 + 30% on income more than ₹15,00,000

  Some common income brackets used in India include:

· Below poverty line (BPL): Households with an annual income of less than Rs. 12,000.

· Destitute: Households with an annual income of less than Rs. 6,000.

· Aspirers: Households with an annual income of between Rs. 12,000 and Rs. 50,000.

· Emerging: Households with an annual income of between Rs. 50,000 and Rs. 100,000.

· Comfortable: Households with an annual income of between Rs. 100,000 and Rs. 250,000.

· Affluent: Households with an annual income of more than Rs. 250,000.

It is important to note that these income brackets are just a general guide, and each bracket has a lot of variation. For example, a household with an annual income of Rs. 50,000 in a rural area may have a very different standard of living than a household with a yearly income of Rs. 50,000 in an urban area.

The Indian Government also uses income brackets to determine eligibility for specific social welfare programs. For example, the Public Distribution System (PDS), which provides subsidized food grains to low-income households, is only available to families with an annual income of less than Rs. 100,000.

The income distribution in India is highly unequal. The wealthiest 1% of households in India own more than 40% of the country's wealth. The poorest 20% of households own less than 5% of the country's wealth.

The Indian Government is taking steps to reduce income inequality, such as increasing spending on education and healthcare and providing social safety nets to people experiencing poverty. However, it is a complex problem that will take time to solve. 

2023 & next five years of India

India is poised for continued strong economic growth in 2023 and the next five years. The IMF forecasts that India will grow at 7% in 2023, making it the fastest-growing major economy in the world. 

Here are some forecasts for India from 2023 to 2028:

2023: The Indian economy is expected to grow steadily over FY2023–24.

The GDP growth in the fourth quarter has pushed the full-year GDP growth of FY2022–23 to 7.2%.

The Indian gaming market is expected to approach US$ 3.7 billion by 2030, with an annual growth rate of more than 12%.

2024: India's GDP is expected to grow between 6% and 6.3% in FY2023–24.

If global uncertainties recede, growth could surpass 7% over the next two years1.

The Asian Development Bank projects growth in India's GDP to rise to 6.7% in FY20243.

2025: India's GDP could double from $2.7 trillion in 2019 to $5 trillion by 20254.

India's consumer market is set to become the world's third-largest by 20255.

2026: India could become the world's third-largest economy by 2026, surpassing Japan and Germany.

2027: India's GDP could surpass $7.5 trillion by 20316.

India is on track to become the world's third-largest economy by 2027, surpassing Japan and Germany, and have the third-largest stock market by 20306.

2028: This year's actual gross domestic product (GDP) growth rate is projected.

Please note that these are forecasts, and actual results may vary.

India's growth is expected to be driven by several factors, including:

· A growing young population: India has a median age of 28.4 years, much lower than the global median of 31.7 years. This young population is a significant asset for the Indian economy, providing a large workforce and a growing domestic market.

· Economic reforms: The Indian Government has implemented several economic reforms in recent years, such as liberalization and privatization. These reforms have created a more favourable environment for businesses to operate in.

· Growing middle class: India's middle class is growing rapidly. This is creating a large domestic market for goods and services.

· Increased foreign investment: India is attracting increasing amounts of foreign investment. This is helping to boost the economy and create jobs.

India's Government is also investing heavily in infrastructure and education. This investment is expected to pay off in the long term by making India more competitive and attractive to businesses and investors.

However, India faces several challenges, such as poverty, inequality, and infrastructure shortages. The Indian Government is committed to addressing these challenges and achieving sustainable economic growth.

Here are some of the key trends that are expected to shape India's economy in the next five years:

· Digital transformation: India is undergoing a rapid digital transformation. The growth of smartphones and the internet is driving this. The digital transformation is creating new opportunities for businesses and individuals.

· Urbanization: India is urbanizing rapidly. This is leading to the growth of new cities and the expansion of existing cities. Urbanization creates new challenges, such as traffic congestion and air pollution. However, it is also creating new opportunities for businesses and individuals.

· Climate change: Climate change is a significant challenge for India. India is vulnerable to droughts, floods, and other climate-related events. The Indian Government is taking steps to address climate change, such as investing in renewable energy and developing climate-resilient infrastructure.

India is well-positioned for strong economic growth in the next five years. The country has several advantages, such as a growing population, a middle class, and a favourable investment climate. However, India faces challenges like poverty, inequality, and climate change. The Indian Government is committed to addressing these challenges and achieving sustainable economic growth.

How tax evasion affects the Government 

Tax evasion can have significant adverse effects on a government and its economy.

Here are some of the ways tax evasion impacts a government: 

Loss of Revenue: Tax evasion results in a significant loss of revenue for the Government. On the federal level, lost income from intentional evasion and unintentional errors comes to about $458 billion per year1. This is referred to as the "net tax gap".

Budget Deficits: The lost revenue can increase budget deficits as the Government has less money to spend on public services.

Reduced Effectiveness: Tax evasion can reduce the effectiveness of the Government. It deprives the Government of money needed to carry out laws and initiatives.

Financial Instability: Tax evasion can weaken the Government's ability to promote stability in economic systems.

Inequality: Tax evasion raises fundamental questions about the tax system's fairness. Often, the wealthy can evade taxes, which can exacerbate income inequality.

Reduced Public Services: The accumulation of taxes owed prevents government spending in critical areas such as aid to schools, welfare, and benefits to senior citizens.

Reduced Government Revenue: Tax evasion deprives the Government of the revenue it needs to fund essential public services such as healthcare, education, infrastructure development, and social welfare programs. This can lead to budget deficits and hinder the Government's ability to meet the needs of its citizens.

Higher Tax Burden on Law-Abiding Citizens: When a portion of the population evades taxes, funding government programs and services falls disproportionately on those who pay their taxes honestly. This can increase tax rates for law-abiding citizens to compensate for the lost revenue.

Economic Inequality: Tax evasion exacerbates income and wealth inequality. When high-income individuals and corporations evade taxes, it reduces the funds available for redistributive programs that help address inequality. This can lead to social unrest and political instability.

Underinvestment in Infrastructure: Reduced government revenue due to tax evasion can result in underinvestment in critical infrastructure projects such as roads, bridges, public transportation, and utilities. This can negatively impact economic growth and competitiveness.

Underfunded Public Services: Tax evasion can lead to underfunding public services like healthcare and education. This affects the quality and accessibility of these services, particularly for lower-income individuals and communities.

Loss of Trust in Government: Widespread tax evasion erodes public trust in government institutions. When citizens perceive that the wealthy or corporations are not paying their fair share, it can lead to disillusionment with the political system and a decline in confidence in Government.

Weakened Rule of Law: Tax evasion undermines the rule of law by allowing individuals and businesses to circumvent tax regulations and obligations. This can erode the Government's ability to enforce laws and maintain order.

Inefficient Resource Allocation: When tax revenue is reduced due to evasion, governments may borrow or print money to cover budget shortfalls. This can lead to inflation and economic instability.

International Consequences: Tax evasion by multinational corporations can also have global consequences, leading to disputes between countries over tax revenues and undermining efforts to combat tax evasion globally.

Loss of Economic Competitiveness: High levels of tax evasion can deter foreign investment and economic growth. Countries with reputations for lax tax enforcement may be less attractive for business development.

Governments employ various measures to combat tax evasion, including stricter enforcement, international cooperation, and the implementation of tax reforms. Reducing tax evasion ensures governments have the resources to provide essential services and fosters a fair and equitable tax system that benefits society.  

Economic reforms - last nine years 

The Indian Government has implemented several economic reforms in the last nine years. These reforms have boosted economic growth, improved the investment climate, and created jobs.

Some of the key economic reforms implemented in the last nine years include:

The Goods and Services Tax (GST): The GST is a single tax introduced in 2017. It replaced several indirect taxes, such as sales tax, excise duty, and service tax. The GST has made it easier for businesses to operate and has reduced business costs.

The Insolvency and Bankruptcy Code (IBC): The IBC is a bankruptcy code introduced in 2016. It has made it easier for businesses to wind up and has helped to reduce the number of bad loans in the banking system.

The Make in India initiative: The Make in India initiative was launched in 2014. It is an initiative aimed at promoting manufacturing in India. The initiative has attracted significant foreign investment and helped boost manufacturing growth.

The Startup India initiative: The Startup India initiative was launched in 2016. It is an initiative aimed at promoting entrepreneurship and startups in India. The initiative has provided several benefits to startups, such as tax breaks and access to funding.

The Direct Benefit Transfer (DBT) scheme: The DBT scheme is a scheme that was launched in 2013. The scheme transfers government subsidies directly to the beneficiaries' bank accounts. The scheme has helped to reduce corruption and leakage.

These are just a few of the key economic reforms that have been implemented in the last nine years. These reforms have positively impacted the Indian economy, boosting growth, creating jobs, and improving the investment climate.

However, there are still some challenges that need to be addressed. For example, poverty and inequality remain high. Additionally, India needs to invest more in infrastructure and education.

The economic reforms implemented in the last nine years have been positive. However, more needs to be done to address the remaining challenges and ensure that the benefits of growth are shared more widely.

Bureaucratic and judicial system of India

India's bureaucratic and judicial systems are two of the most critical institutions in the country. They are responsible for implementing and enforcing the law and providing citizens justice.

The bureaucratic system

The bureaucratic system of India is based on the British civil service system. It is a hierarchical system with a transparent chain of command. The bureaucracy is responsible for implementing government policies and programs. It also plays a role in regulating the economy and providing public services.

The Indian bureaucracy is large and complex. It is divided into several different ministries and departments. Each ministry is responsible for a specific area of government policy. For example, the Ministry of Finance is responsible for economic policy, and the Ministry of Health is responsible for healthcare policy.

Civil servants staff the bureaucracy. Civil servants are appointed by the Government and serve for a fixed term. They are expected to be impartial and to uphold the rule of law.

The bureaucratic system of India has been criticized for needing to be faster and more efficient. It has also been accused of being corrupt. However, the bureaucracy plays an essential role in the Indian Government and economy.

The Indian judicial system

The judicial system of India is based on the standard law system. The common law system is a system of law that is based on precedent. This means that the decisions of previous judges bind judges.

The Indian judicial system is divided into two levels: 

The Supreme Court and the High Courts. The Supreme Court is the highest in India. It can hear appeals from all lower courts in the country. The High Courts are the highest in each state. They can hear appeals from lower courts in their state.

The Indian judicial system is also divided into two types of courts: 

Civil courts and criminal courts.

 Civil courts deal with disputes between individuals and businesses. Criminal courts deal with crimes.

The Indian judiciary is independent of the executive and legislative branches of Government. This means that judges are not subject to political interference.

The judicial system of India has been praised for its independence and commitment to upholding the rule of law. However, the judiciary has also been criticized for being slow and

expensive.

Challenges facing the bureaucratic and judicial systems

Both the bureaucratic and judicial systems of India face several challenges. The bureaucratic system faces corruption, inefficiency, and lack of transparency.

The judicial system faces challenges such as backlogs of cases, delays in

justice, and lack of access to justice for people with low incomes. 

The Government of India is taking steps to address these challenges. For example, the Government has launched several initiatives to improve the bureaucracy's efficiency and reduce corruption. The Government has also launched several initiatives to improve the accessibility and affordability of justice.

Can billionaires change the direction of the Indian economy?

Due to their substantial wealth and influence, billionaires can significantly impact certain aspects of the economy. However, changing the overall direction of a national or global economy is a complex and multifaceted endeavour. Here are some points to consider:

1. Economic Influence: Billionaires often have substantial economic influence by owning large corporations, investments in various industries, and philanthropic efforts. They can influence stock markets, job creation, and business decisions.

2. Philanthropy: Many billionaires engage in philanthropy and donate significant sums to causes they care about. Their philanthropic efforts can positively impact education, healthcare, poverty alleviation, and other societal issues.

3. Job Creation: Billionaires who own or lead large companies can contribute to job creation and economic growth by expanding their businesses, investing in research and development, and entering new markets.

4. Investment and Innovation: Billionaires can invest in innovative technologies and startups, driving technological advancements and fostering entrepreneurship. This can lead to the creation of new industries and job opportunities.

5. Political Influence: Some billionaires may use their wealth to support political candidates and causes that align with their economic interests. This can influence government policies, regulations, and tax laws.

6. Economic Inequality: While billionaires can contribute to economic growth and job creation, they can also exacerbate income and wealth inequality if their wealth continues to grow significantly while many others struggle financially.

7. Limitations: Billionaires, even collectively, have limitations in changing the fundamental direction of an economy. Many factors, including government policies, global economic conditions, technological advancements, and societal shifts, influence economic trends.

8. Systemic Challenges: Addressing complex economic challenges, such as income inequality, access to healthcare, or climate change, often requires coordinated efforts among governments, businesses, and civil society. The actions of individual billionaires, while significant, may not be sufficient to address these systemic issues.

9. Public Opinion: Public opinion can also shape The influence of billionaires. Public sentiment and perceptions of wealth inequality can lead to calls for policy changes and increased scrutiny of billionaire actions.

In summary, while billionaires can shape certain aspects of the economy and society, changing the overall direction of a national or global economy requires a combination of efforts from various stakeholders, including governments, businesses, organizations, and the general public. Economic systems are complex, and addressing systemic challenges often involves a collective approach rather than relying solely on the actions of individual billionaires.